Is My 401(k) at Risk in My NJ Divorce?

For many, the idea of retiring may seem incredibly far away. However, making contributions in your younger years is just as important as putting funds away as you grow older in your professional life. Unfortunately, you may find that these funds are something that could be at risk, however, if you get a divorce. The following blog explores what can happen to your 401(k) if you and your spouse decide to divorce in the Garden State and why connecting with New Jersey equitable distribution attorneys is in your best interest.

How Does New Jersey Divide Property in a Divorce?

If you are going through a divorce, it’s important to familiarize yourself with how the courts will handle the division of assets during these challenging times. New Jersey, like the majority of states, follows the equitable distribution method of diving assets during a divorce. Essentially, this means any asset considered marital property is subject to division based on each spouse’s contributions to the marriage. They will take both financial and domestic contributions into account to ensure stay-at-home parents are protected.

A marital asset, under New Jersey law, is any asset obtained by either party during the span of their marriage. As such, funds you received from your job or property you purchased during your marriage are subject to division. The only exception is an inheritance or gift given solely to one spouse and kept entirely separate from the other.

If you are worried about how your 401(k) will be divided, it’s important to understand that only the amount of funds you accrued over the course of your marriage will be deemed marital property. For example, if you had a balance of $10,000 before you were married, and accumulated $50,000, your spouse is only entitled to a portion of the $50,000.

How Will My 401(k) Be Handled During a Divorce?

During your divorce, your 401(k) will likely be at risk because it is considered a marital asset. If you are not married yet or have recently tied the knot, you may want to consider establishing a pre-or post-nuptial agreement that classifies your retirement fund as separate property in the event of a divorce.

However, if you are currently in the midst of a divorce, there’s not much you can do, as your spouse is entitled to a portion of the funds based on the court’s ruling about their contribution to the marriage. If you want to retain the full amount of funds, you may want to offer your spouse assets of equal value to the portion of your retirement they are entitled to. However, they may want the funds, in which case you’ll need to create a Qualified Domestic Relations Order (QDRO). This allows you to make a withdrawal from the account without incurring tax penalties.

As you can see, there are many considerations you must make regarding your retirement fund if going through a divorce. That’s why it’s in your best interest to connect with an experienced divorce attorney to explore your legal options during these challenging times. At Haber Silver Russoniello & Dunn, we understand how complex these matters can be. That’s why our team is dedicated to fighting for you. Connect with us today to learn how we can help you during these times.